10 common GST mistakes in BAS reports: How to avoid costly errors

A range of online accounting tools, such as Thriday, has simplified this process significantly. Yet, many still need help with their submissions. Some of the most frequent issues identified by the Australian Taxation Office (ATO) relate to the proper use and reporting of the Goods and Services Tax (GST).

Recognising these potential slip-ups is crucial for businesses looking to maintain accurate and compliant financial records. Common mistakes include issues such as claiming GST on private purchases or failing to use the correct tax codes. By understanding these pitfalls, businesses can refine their record-keeping habits and ensure that they meet their tax obligations effectively.

1. Mistakenly claiming GST twice

Errors often occur when handling hire purchase or lease agreements for vehicles or equipment in BAS reports. A common mistake happens when a business owner claims the entire GST amount at the time of purchasing a vehicle in the first quarter. Problems arise as they proceed to log monthly repayments. 

These payments might be incorrectly recorded as either GST or a capital expense. As a result, both GST and CAP tax codes appear on the BAS reports, leading to accidental duplication in GST claims. It's crucial to thoroughly check purchase invoices and regularly scrutinise BAS records to ensure monthly payments are coded correctly.

2. Mistakes with tax codes in the chart of accounts.

It's easy to make errors when setting up tax codes in your chart of accounts. Ensuring accuracy is crucial. An experienced accountant or a BAS agent can be invaluable in configuring these codes correctly before using accounting software for the first time.

3. GST claims on all costs

Some costs do not include GST. These are motor vehicle registrations, bank charges, ASIC fees, PayPal transaction fees, Google Adwords, and interest or director fees. Always verify expenses to avoid incorrect GST claims.

4. GST not included in every sale

When dealing with total sales, it’s important to know that not every item is subject to GST. Some products and services, especially in the medical sector, are exempt. Basic foods for human consumption, such as fruits and vegetables, generally do not attract GST. Confusing taxable sales with these exempt items can lead to incorrect tax reporting.

5. Reporting wages and superannuation correctly

When completing a BAS statement, it's important to separate wages and superannuation correctly. Wages should be reported in W1, not included under G11, which is reserved for non-capital purchases. Superannuation is also excluded from W1 calculations. Understanding these distinctions helps avoid common errors in BAS reporting.

6. Overlooking cash transactions

It's crucial to report all cash sales and purchases accurately, as neglecting to do so can cause significant issues. The ATO has advanced data-matching systems that flag discrepancies, particularly in sectors like building and construction. 

Business owners in these industries must submit a Taxable Payments Report each year, and all cash dealings need to be disclosed. It's wise to consult with a bookkeeper or accountant to make sure all tax deductions and GST credits are properly discussed and recorded.

7. GST credits on private spending

When it comes to spending on personal items like personal loans or director's fees, businesses cannot include these for GST credits in their BAS Statements. Such purchases being for personal use are not eligible for claiming on GST returns.

8. Reporting Capital Asset Purchases with incorrect tax codes

When a business buys an asset over $1000, it should be listed as a capital purchase in the BAS at G10. Avoid confusing it with standard purchases under G11. Always consult an accountant if you're unsure, especially for items like hire purchases and vehicle leases.

9. Omitting asset sales from total sales

When adding up everything for total sales in a BAS, some overlook selling items like motor vehicles, a trade-in, or office equipment. Missing these means not fully reporting what was sold, and this could impact how well a business tracks its finances.

10. Claiming GST  credits on non-registered suppliers

When a business claims GST credits, it is crucial to confirm that the supplier is correctly registered for GST. To ensure accuracy, verify whether the supplier has included GST on the invoice. One helpful tool is the ABN lookup service, where you can search the supplier's ABN or business name to confirm their GST status.

Under Australian law, suppliers must provide an ABN when offering goods or services. If a supplier fails to provide an ABN, businesses are obliged to withhold 46.5% of the payment. This is known as "No ABN withholding." There are a few exceptions:

• An invoice or document that quotes the supplier's ABN is provided.
  
• The ABN number belongs to the supplier’s agent.
  
• The payment is below $75, excluding GST, and the supplier is not entitled to an ABN.
  

Proper record-keeping is essential for business owners to avoid errors when claiming GST credits. Regularly updating how GST is processed can prevent misunderstandings.

Businesses should also remain informed by taking advantage of resources such as the quarterly BAS bulletin from the ATO. For those needing additional guidance, attending ATO-hosted webinars is a smart choice. These sessions help keep businesses informed about changes and requirements.

If managing the BAS process becomes overwhelming, consulting a qualified professional might be the best solution. BAS or Tax Agents are trained to ensure the BAS is accurately prepared and submitted. This professional guidance helps with reporting obligations related to GST, along with PAYG instalments, PAYG withholding, and any applicable fringe benefits tax.

For tailored advice, it's always a good strategy to talk to a tax advisor or search for a financial expert who understands the unique needs of your business. Tailored guidance ensures adherence to Australia's taxation regulations and optimises your business financial operations.

Dreading BAS time? Thriday takes the hassle out of GST, PAYG, and more!

Let's be honest, no one loves dealing with their Business Activity Statement (BAS). Remembering which transactions are GST-related, calculating PAYG instalments, and keeping track of all those receipts can be a real headache. But with Thriday, it doesn't have to be.

Here's how Thriday makes BAS a breeze:

• Snap and forget those receipts: Take a photo of your receipts with the Thriday app, and we'll automatically extract all the important details like date, amount, and GST. No more shoeboxes full of receipts!
• GST sorted in seconds: Thriday automatically calculates the GST you've collected and paid, so you can claim accurate Input Tax Credits and avoid errors.
• PAYG calculated for you: Thriday helps you stay on top of your Pay-As-You-Go (PAYG) instalments, so you can meet your tax obligations with ease.
• Instant BAS reports: Generate accurate and ATO-ready BAS reports with just a few clicks. No more manual calculations or data entry!

Ready to say goodbye to BAS stress? Learn more about Thriday and discover how easy BAS can be here. 

Frequently Asked Questions

How can I correct a GST error I made on a previous BAS?

If an error in GST reporting is discovered, it can be corrected by adjusting the next BAS. This approach allows businesses to fix mistakes without needing to amend each affected statement. The Australian Taxation Office (ATO) provides guidelines on how to make these corrections effectively.

Are there any limits on correcting GST credit errors on my next BAS?

The ATO has specific value limits for GST credit errors that can be adjusted in the next BAS without penalties. Businesses can correct mistakes within these defined thresholds. Staying within these limits helps avoid fines or further complications.

What are the latest rules for fixing GST errors on my BAS?

New rulings were introduced regarding the correction of GST mistakes in BAS. These changes provide updated procedures for businesses to rectify errors, ensuring better compliance with tax regulations. For further information, read this article.